Payment of dividend

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jayesh sharma (Querist)
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06 June 2012 Can a company pay dividend out of current years' profit if it has accumulated losses?

kindly give your valuable suggestion.

Ajay Mishra

Ajay Mishra (Expert)
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06 June 2012 Hi

Section 205(1)(b) provides that if a company has incurred loss in any previous year or years, then the amount of loss or an amount which equal to the amount provided for depreciation for the year or those years whichever is less shall be set off against the profit of the company for the year for which dividend is proposed to be declared or paid. Therefore, it cannot pay dividend in the latter year unless the company has adjusted the amount of loss against the profits of the year referred to above. The company shall ensure that the previous year's depreciation will be duly provided before paying dividend.

Regards